Explaining Inequality in India

Since the publication of Thomas Piketty's Capital in the Twenty-First Century in 2013, the issue of income inequality has again come to the fore, both in industrialised and developing countries.

The detrimental effects of high inequality are well-known. It slows down economic development, weakens political institutions, and can also trigger violence. While policy experts have a good understanding of inequality dynamics at the national level, what is less well known is how inequality shapes our societies at the local level. This project hopes to fill this gap, which is of particular relevance in the Indian context, where both poverty and inequality are pressing issues.

Local-level inequality is an understudied topic. In order to obtain reliable measures of inequality at the local level, reliable GDP accounts at the regional level are necessary. Developing countries, however, lack the financial resources and statistical capacity to collect accurate, frequent income data for rural citizens, restricting all policy discussions to a very cursory level.

This project tackles this key difficulty by using satellite data on night-time light density as a proxy for economic activity. The rationale is that, especially in developing countries and rural areas, the use of electricity at night is a robust predictor of local wealth.

Reliable local-level inequality data will allow us to investigate the relationship between inequality and local development, but also whether inequality triggers violence, especially during economic crises. We also investigation location decisions by skilled workers and seek to identify which local political institutions areas are most fragile. This project is led by Ahmed Skali. Other investigators include Simon Feeny and Alberto Posso from the Research Group and Dr Shyam Nath, Dr Peter Holzschuh and Dr Sougata Ray from Amrita University, India.